EDA selects firm to complete 2018-19 audits, among other actions

Following an approximate 90-minute closed session after a 60-minute open, virtual world regular EDA monthly meeting Friday morning, April 24, the Front Royal-Warren County Economic Development Authority Board of Directors passed a series of resolutions authorizing a variety of actions.

Are we ready to meet? – The EDA prepares for its virtual monthly meeting of Friday, April 24. Royal Examiner Photos

Among those actions approved by unanimous 6-0 votes, with the board’s seventh seat remaining vacant following Mark Baker’s January 23rd resignation, were:

1- authorization to proceed to a contract with Mid-Atlantic based regional accounting company Brown Edwards to complete the EDA’s Fiscal Year 2018 and 2019 audits;

2 – approval of an Emergency Deferment Program for the EDA’s Rural Business Enterprise (micro) Loan (RBEL) and Intermediary Relending Program (IRP) larger loan programs;

3 a-b – appointment of five members to the Small Business Loan Committee (SBLC) the EDA is forming to review and make recommendations on issuance of the EDA’s small business loan program; and approval of a charter on guidelines for the SBLC function and membership;

4 – authorization to use accumulated escrow account funds for several months of loan payments to First Bank of Strasburg; and,

5 – approval of a letter of support for EDA participation in a “Start-Up Shenandoah Valley” program.

Pulled from consideration at Friday’s meeting was the return of a security deposit on the terminated purchase plan of the 514 East Main Street apartment building.

Where to start?

Royal Examiner took a pandemic-precautionary masked man visit to the EDA’s Kendrick Lane headquarters after adjournment to accumulate some additional information than was available in remote virtual meeting world Friday morning to pin that down. We had some idea of priorities from past meeting comments and emphasis.

Royal Examiner ventured to the EDA’s Kendrick Ln. headquarters for additional meeting detail, face mask in hand.

Finally, back audits contract

It is certainly good news to have come to the contract-signing time for a firm willing to take on an accounting of the EDA’s perhaps complicated finances over the past two years as the alleged financial scandal that exploded in the final year of former Executive Director Jennifer McDonald’s tenure was exposed by a contracted forensic audit and consequent civil litigation was filed and joined from several legal angles.

Of course certified public accounting firm Brown Edwards won’t be starting from scratch, as retired Warren County Finance Director Carolyn Stimmel and financial associate Heather Tweedie have put considerable effort into assembling the numbers at the base of the EDA financial activities of those two years.

With completed audits playing a role in the EDA’s ability to carry out future project financing as necessary, we asked Executive Director Doug Parsons about the choice of Brown Edwards and what kind of timeframe the EDA is hoping to have those audits accomplished.

Parsons noted the EDA was working with Brown Edwards out of its Roanoke office. The company’s website cites a mid-Atlantic regional focus based out of Virginia, West Virginia and Tennessee, with a national work history scope and staff of 350. It lists eight Virginia offices, two in West Virginia and one in Kingsport, Tennessee.

Parsons said both respondents to its audit Request For Proposals (RFP) were quality firms. The other candidate was SB & Company out of Owings Mill, Maryland.

“They were both very well qualified and great, great firms. And we really did have a very difficult time choosing between the two,” Parsons observed.

Of a completion timeframe, Parsons said, “We’re going to work with Brown Edwards to establish a deadline, but we’re going to propose September 30th for both the ’18 and the ’19 audits. We hope to get them before that, and I think we’ll get the ’18 pretty well before that … And you’re right, I feel we do have a bit of a head start because Carolyn and Heather did accumulate all this documentation.”

As for the positive impetus financially of completion of the audits, Parsons explained, “From the perspective of taking out new loans for an economic development project in the future, it would be. For a lot of the banks as far as any kind of new loan, and for some we’ve approached about refinancing, the number one heartburn is us not having our audits. So, we hope that opens the door to new fiscal opportunities down the road.”

Loan Deferments

As for the approval of an Emergency Deferment Program for the EDA’s Rural Business Enterprise Loan (RBEL) and Intermediary Relending Program (IRP), Parsons explained the RBEL was the EDA’s smaller business or “micro” loans and that the IRP is its three larger business loans. Qualifying clients of both will be offered temporary deferments as they navigate business impacts from the COVID-19 pandemic and response.

“The board approved more leniency for our existing customers who are in good standing during the COVID-19 crisis. They extended the latitude on payments out, I believe, to July,” Parsons said.

Small Business Loan Committee

And the EDA Board moved forward on the formation of a committee to review future business assistance loan applications.

“For the new loans that we’re getting ready to roll out, they appointed five members, and they also approved the charter pending the changes that we went over with our attorney,” Parsons told Royal Examiner. Included in those changes were term limits for members. A consensus was reached to initiate two-year terms, with a maximum service of two terms totaling four years of overseeing, having denial authority, and forwarding other applications to the EDA Board of Directors for final approval.

“It gives them an idea of what they’re getting into,” Board Chairman Daley observed of the term limits.

EDA Board Chairman Ed Daley said term limits will give SBLC members an idea of ‘what they’re getting into’. – But did Daley know what he was getting into with his home hook up to Friday’s meeting when his cat tried to seize control of his phone connection to the meeting?

The five appointees to the SBLC are: Bediong A. Nyokon, whom Parsons said brings much financial experience to the committee; Ashley Shickle, who is with the Northern Shenandoah Valley Regional Commission; Jeanian Clark, vice president of Workforce Solutions at Lord Fairfax Community College with a focus on employer and community outreach and corporate training; Chris Laurence, a local realtor with Key Moves Properties; and Jim Wolfe, an assistant professor at George Mason University.

The creation of the advisory committee appears to be a move toward added transparency and oversight to avoid the kind of insider favors alleged to have occurred in the EDA civil litigation stemming from the Cherry Bekaert investigation of EDA finances focused on the 2014-2018 time period.

Parsons explained the Small Business Loan process as it is developing. “It looks like Gretchen (EDA Administrative Assistant Gretchen Henderson) and I will be the first to review the incoming applications to make sure they’re complete and not completely out of leftfield. And if they look good, and they’re complete we’ll forward them to the loan committee for their review. The loan committee can deny it right there within committee. But the ones that they feel are viable they will forward to the full (EDA) board of directors for further review and consideration.”

He noted that those rejected in the committee would not be forwarded to the EDA board for further consideration unless there was an applicant request for further justification of the rejection.

“We’re really happy that the charter and loan committee were approved, and we’ll move forward and get to a point here soon where we’ll be able to offer these loans to the community.”

Of the pulling of the security deposit reimbursement on the 514 East Main Street apartment building from the agenda, rather than either a positive sign the deal wasn’t completely dead or that anything was wrong, Parson said the tabling was more from an abundance of caution.

“We need to look at the sales contract. The board just wasn’t ready – I think they just tabled it … so they could explore the contract a little more. We didn’t have it at our fingertips. So, we just want to make sure we do the right thing for the EDA and the purchaser.”

Audio Link; No Town Report

Hear a discussion of these matters, as well as the EDA’s earlier monthly Finance and Communications Committee Reports; Parsons’ Executive Director’s report; County Administrator Doug Stanley’s report on county projects, including the potential of absorbing the EDA’s two-person staff into the County’s departmental umbrella; not to mention Chairman Daley’s report on being momentarily disconnected from the meeting by his cat’s attempt to seize control of the phone by which he was communicating to the board verbally, in the below linked Royal Examiner recording.

One report you will not hear is the Front Royal Town Manager’s monthly update on Town projects. Despite its traditional spot on the Town-County EDA monthly meeting agenda, Interim Town Manager Matt Tederick was again not present nor linked in to give the monthly Town Manager’s Report, nor was there a written Town report submitted to the EDA agenda packet.

Town Hall, its staff again absent from participation in an EDA meeting despite a stated desire the Town remains a partner in the existing EDA that council has chosen to sue, rather than negotiate a financial settlement with.

As previously reported, the Town has filed hostile litigation against the EDA, now seeking recovery of over $20 million while the EDA continues to offer non-attorney-fee fueled negotiations to establish exactly what it may owe the Town in misdirected assets.

And while indicating a desire to stay legally connected to the existing EDA while moving toward the creation of a second, unilateral EDA, the Town continues to decline participation in the existing EDA’s meetings.